UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________________________________________

FORM 10-QSB

| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2003       
| | ------------------------------------------------------------------------------------------------------------------------------------------------
| | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _____________.

FIRST NILES FINANCIAL, INC.

---

(Exact name of small business issuer as specified in its charter)

|Delaware

(State or other jurisdiction of
incorporation or organization)     | 34-1870418

(I.R.S. Employer Identification No.)
|---------------------------------------------------------------------------- | ------------------------------------------------
|55 North Main Street, Niles, Ohio


(Address of principal executive offices) | 44446

(Zip Code)                               

Issuer's telephone number, including area code: (330) 652-2539

> Shares of common stock, par value $.01 per share, outstanding as of November 3, 2003: 1,388,538
> 
> Transitional Small business Disclosure Format (check one): Yes 
> No

|Item 1. | Financial Statements
|------- | --------------------

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
FIRST NILES FINANCIAL, INC. AND SUBSIDIARY
(In thousands, except share data)

|                                                                                                       | September 30,
2003 | December 31,
2002
|------------------------------------------------------------------------------------------------------ | ------------------ | -----------------
|ASSETS                                                                                                 | (Unaudited)        |                  
|Cash and cash equivalents:                                                                            
|Noninterest bearing                                                                                    | $  1,384           | $  1,542         
|Interest bearing                                                                                       | 4,794              | 8,438            
|Total cash and equivalents                                                                             | 6,178              | 9,980            
|                                                                                                      
|Securities available for sale - at market                                                              | 51,786             | 44,734           
|Securities to be held to maturity - at cost                                                            | 450                | 3,349            
|Loans receivable, net of allowance
    for loan losses of $762 and $762                                | 38,287             | 40,205           
|Accrued interest receivable                                                                            | 532                | 758              
|Federal Home Loan Bank stock, at cost                                                                  | 1,084              | 1,053            
|Real estate investment, limited
    partnership - at equity                                            | 141                | 163              
|Prepaid expenses and other assets                                                                      | 90                 | 46               
|Prepaid federal income taxes                                                                           | 108                | 13               
|Premises and equipment, at cost less
    accumulated depreciation                                      | 300                | 334              
|                                                                                                       |                    |                  
|TOTAL ASSETS                                                                                           | $98,956            | $100,635         
|                                                                                                      
|LIABILITIES                                                                                            |                    |                  
|Deposits                                                                                               | $61,469            | $60,895          
|Accrued interest payable                                                                               | 129                | 145              
|Accounts payable and other liabilities                                                                 | 725                | 1,282            
|Federal Home Loan Bank advances                                                                        | 20,500             | 19,500           
|Deferred federal income tax liability                                                                  | 80                 | 480              
|                                                                                                       |                    |                  
|TOTAL LIABILITIES                                                                                      | 82,903             | 82,302           
|SHAREHOLDERS' EQUITY                                                                                   |                    |                  
|Preferred stock, $.01 par value, authorized
  500,000 shares; none outstanding                         | -                  | -                
|Common stock, $.01 par value, authorized
  6,000,000 shares; 1,754,411 shares issued
  and outstanding | 18                 | 18               
|Paid in capital                                                                                        | 6,883              | 6,888            
|Retained earnings                                                                                      | 13,996             | 13,766           
|Net unrealized gains on securities
  available for sale                                                | 845                | 2,013            
|Common stock purchased by the Employee
  Stock Ownership Plan                                          | (819)              | (819)            
|Treasury stock - 365,873 shares and
  288,641 shares                                                   | (4,870)            | (3,533)          
|TOTAL SHAREHOLDERS' EQUITY                                                                             | 16,053             | 18,333           
|TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                                             | $98,956            | $100,635         
|                                                                                                      

SEE ACCOMPANYING NOTES

|                                                    | Three Months Ended
September 30 | Nine Months Ended
September 30,
|--------------------------------------------------- | ------------------------------- | -------------------------------
|                                                    | 2003                            | 2002                           
|Interest income:                                   
|Loans receivable:                                  
|First mortgage loans                                | $587                            | $668                           
|Consumer and other loans                            | 32                              | 41                             
|Mortgage-backed and related securities              | 280                             | 133                            
|Investments                                         | 329                             | 573                            
|Interest-bearing deposits                           | 15                              | 33                             
|TOTAL INTEREST INCOME                               | 1,243                           | 1,448                          
|Interest expense:                                  
|Deposits                                            | 287                             | 415                            
|Borrowings                                          | 228                             | 225                            
|TOTAL INTEREST EXPENSE                              | 515                             | 640                            
|NET INTEREST INCOME                                 | 728                             | 808                            
|Provision for loan losses                           | -                               | 12                             
|                                                   
|NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES | 728                             | 796                            
|                                                   
|Noninterest income:                                
|Gain on sale of securities                          | 55                              | 74                             
|Service fees and other income                       | 21                              | 14                             
|TOTAL NONINTEREST INCOME                            | 76                              | 88                             
|Noninterest expense:                               
|Equity in loss of limited partnership               | 10                              | 10                             
|General and administrative:                        
|Compensation and benefits                           | 247                             | 276                            
|Occupancy and equipment                             | 19                              | 22                             
|Federal deposit insurance premiums                  | 2                               | 2                              
|Legal and audit                                     | 25                              | 39                             
|Franchise taxes                                     | 45                              | 41                             
|Other operating expense                             | 84                              | 68                             
|TOTAL NONINTEREST EXPENSE                           | 432                             | 458                            
|INCOME BEFORE INCOME TAXES                          | 372                             | 426                            
|Federal income taxes                                | 111                             | 130                            
|NET INCOME                                          | $  261                          | $  296                         
|BASIC EARNINGS PER SHARE                            | $  .20                          | $  .22                         
|DILUTED EARNINGS PER SHARE                          | $  .20                          | $  .21                         

SEE ACCOMPANYING NOTES

|                                             | Nine Months Ended September 30,
|-------------------------------------------- | -------------------------------
|                                             | 2003                           
|                                            
|Net income                                   | $  783                         
|Other comprehensive income:                 
|Unrealized gains (losses) on securities:    
|Unrealized gains (losses) arising for period | (1,636)                        
|Related income tax                           | (556)                          
|                                             | (1,080)                        
|Reclassification adjustment:                
|Gain included in net income                  | (133)                          
|Related income tax                           | 45                             
|                                             | (88)                           
|Other comprehensive income                   | (1,168)                        
|COMPREHENSIVE INCOME                         | $ (385)                        

SEE ACCOMPANYING NOTES

|                                                                                                         | Nine Months Ended
September 30,
|-------------------------------------------------------------------------------------------------------- | -------------------------------
|                                                                                                         | 2003                           
|CASH FLOWS FROM OPERATING ACTIVITIES                                                                     |                                
|Net income                                                                                               | $  783                         
|Adjustments to reconcile net income to net cash
  provided by operating activities                       |                                
|Deferred income taxes                                                                                    | 201                            
|Depreciation                                                                                             | 20                             
|Amortization of deferred loan fees and costs                                                             | (19)                           
|Amortization of discounts and premiums on
    investments and mortgage-backed and
    related securities | 53                             
|Gain on sale of securities                                                                               | (133)                          
|Loss on sale of equipment                                                                                | 11                             
|Equity in loss of limited partnership                                                                    | 21                             
|Provision for loan losses                                                                                | -                              
|Federal Home Loan Bank stock dividends                                                                   | (32)                           
|                                                                                                         | 905                            
|Net increase in accrued interest receivable,
  prepaid expenses and other assets                         | 88                             
|Net increase (decrease) in accrued interest,
  accounts payable and other liabilities                    | (572)                          
|NET CASH PROVIDED BY OPERATING ACTIVITIES                                                                | 421                            
|CASH FLOWS FROM INVESTING ACTIVITIES                                                                     |                                
|Proceeds from sale of securities available for sale                                                      | 4,377                          
|Purchase of securities available for sale                                                                | (40,194)                       
|Proceeds from maturity of securities available
  for sale                                                | 27,075                         
|Proceeds from principal payments on
  mortgage-backed and related securities                             | 2,900                          
|Net decrease in interest-bearing
  deposits with banks                                                   | 4,421                          
|Net (increase) decrease in loans                                                                         | 1,936                          
|Proceeds from sale of equipment                                                                          | 7                              
|Additions to premises and equipment                                                                      | (4)                            
|NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES                                                      | 518                            
|CASH FLOWS FROM FINANCING ACTIVITIES                                                                     |                                
|Net increase (decrease) in savings accounts,
  MMDAs and NOW accounts                                    | (478)                          
|Net increase (decrease) in certificates of
  deposits                                                    | 1,052                          
|Purchase of Treasury shares                                                                              | (1,691)                        
|Cash dividends paid on common stock                                                                      | (553)                          
|Proceeds from FHLB Advances                                                                              | 1,000                          
|Common stock options exercised                                                                           | 349                            
|NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                                                      | (321)                          
|NET INCREASE IN CASH                                                                                     | 618                            
|CASH AT BEGINNING OF PERIOD                                                                              | 766                            
|CASH AT END OF PERIOD                                                                                    | $1,384                         
|Cash paid during the period for:                                                                         |                                
|Interest                                                                                                 | $1,627                         
|Income taxes                                                                                             | $ 230                          

SEE ACCOMPANYING NOTES

NOTE A -- SIGNIFICANT ACCOUNTING POLICIES

The accounting and reporting policies followed by First Niles Financial, Inc. ("First Niles") are in accordance with accounting principles generally accepted in the United States of America and conform to general practices within the savings and loan industry.

The accompanying unaudited financial statements were prepared in accordance with instructions for Form 10-QSB and, therefore do not include information or footnotes necessary for a complete
presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America. Management believes that all
normal recurring adjustments that are necessary for a fair presentation of interim period financial information have been reflected in these financial statements. The results of operations for the
interim periods discussed herein are not necessarily indicative of the results that may be expected for a full year. These interim financial statements should be read in conjunction with the
consolidated financial statements and notes included in the First Niles Financial, Inc. Annual Report on Form 10-KSB for the year ended December 31, 2002.

NOTE B -- STOCK CONVERSION

On October 26, 1998, First Niles began trading as a public company on the Nasdaq SmallCap Market. First Niles issued 1,754,411 shares, $.01 par value common stock, at $10.00 per share, raising
$15.5 million, net of shares acquired by the newly formed Employee Stock Ownership Plan (the "ESOP") and net of the costs of the conversion. Home Federal Savings and Loan Association of Niles
converted to a federal stock savings and loan association and simultaneously received proceeds of $8.5 million in exchange for all of its common stock to First Niles. This transaction was accounted
for using historical cost in a manner similar to that in a pooling of interests.

NOTE C -- EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income by the weighted-average shares outstanding, during the period, less weighted-average shares in the ESOP that are unallocated and not
committed to be released. Diluted earnings per share reflect the potential effect of stock options and is calculated using the treasury stock method. At September 30, 2003, the market price of First
Niles stock exceeded the exercise price of all outstanding options; the resulting dilution resulted in a reduction from basic earnings per share, as rounded to the nearest whole cent for the nine month period ended September 30, 2003, but did not result in a reduction for the three month period ended September 30, 2003.

The following table sets forth the computation of earnings per share for the three month periods ended September 30, 2003 and September 30, 2002 (income in thousands):

|                                                  | Three Months Ended
September 30, | Nine Months Ended
September 30,
|------------------------------------------------- | -------------------------------- | -------------------------------
|                                                  | 2003                             | 2002                           
|Net income                                        | $ 261                            | $ 296                          
|Earnings applicable to basic
  earnings per share | 261                              | 296                            
|Average common shares                             | 1,410,961                        | 1,478,590                      
|Less average unallocated
  ESOP shares            | 99,142                           | 117,939                        
|Average common shares
  outstanding - basic       | 1,311,819                        | 1,360,652                      
|Average common shares
  outstanding - diluted     | 1,333,047                        | 1,385,606                      
|Earnings per share - basic                        | $0.20                            | $0.22                          
|- diluted                                         | $0.20                            | $0.21                          

|Item 2. | Management's Discussion and Analysis of Financial Condition and
Results of Operations
|------- | -------------------------------------------------------------------------------------

General

First Niles Financial, Inc., a Delaware corporation, was formed in July 1998 to act as the holding company for Home Federal Saving and Loan Association of Niles upon the completion of Home
Federal's conversion from mutual to stock form. The conversion was completed on October 26, 1998. All references to First Niles or Home Federal, unless otherwise indicated, on or before October 26,
1998, refer to Home Federal before its conversion from mutual to stock form. References in this Form 10-QSB to "we", "us", and "our" refer to First Niles and/or Home Federal as the context
requires.

Our principal business consists of attracting retail deposits from the general public and investing those funds primarily in permanent and construction loans secured by first mortgages on
owner-occupied, one-to-four family residences. We also originate, to a lesser extent, loans secured by first mortgages on non-owner-occupied one-to-four family residences, permanent and construction
commercial and multi-family real estate loans, and consumer loans. Excess funds are generally invested in investment securities and mortgage-backed and related securities. Additionally, we borrow
funds from the FHLB and reinvest the proceeds in investment securities at favorable interest rate spreads.

The following discussion compares our consolidated financial condition at September 30, 2003 to December 31, 2002 and the results of operations for the three month and
nine month periods ended September 30, 2003 with the comparative periods ended September 30, 2002. This discussion should be read in conjunction with the consolidated financial statements and
footnotes included herein.

Changes in Financial Condition at September 30, 2003 and December 31, 2002

Total assets decreased by $1.7 million, or 1.7%, to $99.0 million at September 30, 2003 from $100.6 million at December 31, 2002. This decrease was primarily the
result of loan prepayments. The loan portfolio declined $1.9 million with the proceeds therefrom being reinvested in short-term mortgage backed and related securities.

Deposits increased $574,000 during this nine month time period. The increase in deposits was comprised of a $1.1 million increase in certificates of deposit, partially
offset by a $479,000 decrease in savings accounts and NOW accounts. Management perceives that the increase in deposits during the time period is primarily attributable to its decision to maintain
deposit interest rates at levels generally higher than the local competition. This strategy is designed to gain market share in a low interest rate environment. Borrowings increased $1.0 million
during the period, as the proceeds therefrom were invested in investment securities at a positive spread, as part of our leverage strategy as discussed below.

Shareholders' equity at September 30, 2003 was $16.1 million, a $2.3 million, or 12.4% decrease from December 31, 2002. The decrease in shareholders' equity was
primarily the result of a $1.2 million decrease in net unrealized gains on securities available for sale and a $1.3 million increase in treasury shares, partially offset by a $231,000 increase in
retained earnings. The company repurchased 105,112 of its shares during the nine month period ended September 30, 2003 at an average price of $16.09.

A portion of the repurchase of the aforementioned shares completed the 5.0% share repurchase program originally authorized in July 2002. During May, 2003, the
Company's Board of Directors authorized another 12-month share repurchase program, up to a maximum of 5.0%, or 71,612 shares, of the total outstanding shares of the Company. This repurchase program
was completed during the quarter ended September 30, 2003.

Book value per common share was $11.56 at September 30, 2003, compared to $12.51 at December 31, 2002. The dividend paid during each the first three quarters of 2003
was equivalent to $0.14 per common share. At September 30, 2003 and December 31, 2002, there were 1,388,538 and 1,465,770 shares of common stock outstanding, respectively.

Nonperforming loans, consisting of nonaccrual loans and loans delinquent more than 90 days, totaled $1.0 million at September 30, 2003, or 1.1% of total assets,
compared to $1.5 million, or 1.5% of total assets as of December 31, 2002. The allowance for loan losses was $762,000 at September 30, 2003, representing coverage of 72.6% of non-performing loans and
2.0% of net loans receivable. At December 31, 2002, the allowance for loan losses was also $762,000, represented coverage of 50.2% of nonperforming loans and 1.9% of net loans receivable. Management
believes that the current level of the allowance for loan losses remains adequate to absorb losses resulting from uncollectible loans. At September 30, 2003 and December 31, 2002 we had no foreclosed
assets.

Results of Operations for the Three-Month Period Ended September 30, 2003 as Compared to September 30, 2002

General. Our results of operations depend primarily on our net interest income, which is determined by (i) the difference between interest
earned on interest-earning assets, consisting primarily of mortgage loans, collateralized mortgage obligations, other investments and interest-bearing deposits in other institutions, and interest
expense on interest-bearing liabilities, primarily deposits and borrowings, and (ii) the relative amounts of our interest-earning assets and interest-bearing liabilities. The level of non-interest
income, such as fees received from customer deposit account service charges and gains on sales of investments, and the level of non-interest expense, such as federal deposit insurance premiums,
salaries and benefits, office occupancy costs, and data processing costs, also affect our results of operations. Finally, our results of operations may also be affected significantly by general
economic and competitive conditions, particularly changes in market interest rates, government policies and actions of regulatory authorities, all of which are beyond our control.

Net Income. For the three months ended September 30, 2003, First Niles recorded net income of $261,000, as compared to $296,000 for the same
period in 2002, a decrease of $35,000, or 11.8% This net income resulted in an annualized return on average assets of 1.04%, as compared to 1.21% for the comparative period one year ago. The
annualized return on shareholders' equity for the three months ended September 30, 2003 was 6.08% compared to 6.59% for the three months ended September 30, 2002. Earnings per share and diluted
earnings per share for the three months ended September 30, 2003 were $0.20 and $0.20, respectively, as compared to $0.22 and $0.21 for the same three month period in 2002.

Net Interest Income. Net interest income decreased by $80,000, or 9.9%, for the three month period ended September 30, 2003 as compared to the
respective 2002 period. For the three months ended September 30, 2003, the interest rate spread was 2.55% as compared to 2.81% for the same period one year prior. The net interest margin for the
current period was 2.96%, as compared to 3.37% for the same period one year ago.

For the three months ended September 30, 2003, total interest income decreased by $205,000, or 14.2%, as compared to the same period in 2002. Specifically, interest income on loans receivable,
investments and interest bearing deposits decreased a collective $352,000 for the three month period ended September 30, 2003 as compared to the same period in 2002. A $147,000 increase in interest
on mortgage-backed and related securities for the three month period ended September 30, 2003 as compared to the same period in 2002 partially offset the aforementioned decrease. This increase was
due to significantly higher balances of mortgage-backed and related securities during the period. The yield on total earnings assets for the current quarter was 5.05%, as compared to 6.06% for the
comparative quarter one year ago.

Total interest expense decreased by $125,000, or 19.5%, as compared to the same period one year prior. Total interest on deposits decreased $128,000, or 30.8%, from period to period, despite
higher average deposit balances. The cost of funds for the quarter ended September 30, 2003 was 2.50%, as compared to 3.25% for the quarter ended September 30, 2002.

The decreases effecting both the asset and liability sides of the balance sheet as described above were generally attributable to the continued downward movement in market interest rates
experienced during the past year.

The cost of funds would have decreased further if not for the Company's borrowings from the FHLB. The cost of these borrowings were 4.51% at September 30, 2003, as compared to 4.58% at December
31, 2002. These borrowings were obtained for subsequent reinvestment into investment securities in order to generate additional interest income. The resulting net interest rate spread and net
interest margin on this leveraged strategy is generally lower than the same measures derived from core operations. The interest rate spread and net interest margin on the leverage strategy was
approximately 180 basis points as of September 30, 2003. This leverage strategy requires a negligible amount of administrative expense and is the primary reason that such an activity can be
undertaken at a reduced interest rate spread and net interest margin as compared to core operations, while making a significant contribution to net income.

Provision for Loan Losses. For the three months ended September 30, 2003 the Company had no provision for loan
losses compared to a $12,000 provision for the same period in 2002. This decline is generally attributable to a stabilization in the overall asset quality of our loan portfolio.  The provision for loan losses is a result of management's periodic analysis of risks inherent in our loan portfolio from time to time, as well as the adequacy of the allowance for loan losses. It is our policy to provide valuation allowances for estimated losses on loans based upon past loss experience, current trends in the level of
delinquent and specific problem loans, loan concentrations to single borrowers, adverse situations that may affect the borrower's ability to repay, the estimated value of any underlying collateral,
and current and anticipated economic conditions in our market area. Accordingly, the calculation of the adequacy of the allowance for loan losses is not based directly on the level of non-performing
assets.

Management will continue to monitor the allowance for loan losses and make future additions to the allowance through the provision for loan losses as economic
conditions dictate. Although we maintain the allowance for loan losses at a level which we consider to be adequate to provide for losses, there can be no assurance that future losses will not exceed
estimated amounts or that additional provisions for loan losses will not be required in future periods. In addition, management's determination as to the amount of the allowance for loan losses is
subject to review by the Office of Thrift Supervision and the Federal Deposit Insurance Corporation, as part of their examination process, which may result in the establishment of an additional
allowance.

Noninterest Income. Noninterest income totaled $76,000 for the three months ended September 30, 2003, $12,000 less than during the same period
in 2002. This decrease was essentially the result of a $19,000 decrease in gain on sale of investment securities in the current quarter as compared to previous comparative quarter. Service fees and
other income increased by $7,000 during the current quarter as compared to the same quarter in 2002.

Noninterest Expense. Noninterest expense decreased $26,000, or 5.7%, for the three months ended September 30, 2003 as compared to the same
period in 2002. This decrease was primarily attributable to a $29,000 decrease in compensation expense related to the retirement of one of the Company's executive officers and one other officer. The
duties of these officers have generally been absorbed by existing personnel and the addition of one employee. However, further staff additions may be necessary as the personnel situation is evaluated
over the next several months.

Federal Income Taxes. The provision for federal income taxes decreased by $19,000 in the three months ended September 30, 2003, as compared to the same period in 2002, resulting
in an income tax provision of $111,000. The effective tax rate in the current three month period was 29.8%. For the respective three-month period, one year prior, the effective tax rate was 30.5%.
The above effective tax rates differ from the statutory rate of 34% primarily due to our ownership interest in a low income housing tax credit program. The tax credits from this program are expected
to last through 2006.

Results of Operations for the Nine-Month Periods Ended September 30, 2003 as Compared to September 30, 2002

Net Income. First Niles recorded net income of $783,000 for the nine months ended September 30, 2003. This net
income resulted in an annualized return on average assets for the nine-month period of 1.04%, compared to 0.98% for the same period one year ago, and an annualized return on average shareholders'
equity of 5.94%, as compared to 5.34% for the same period one year ago. Net income increased by $73,000, or 10.3%, for the nine months ended September 30, 2003 as compared to the nine months ended
September 30, 2002. The increase in net income was comprised of a $70,000 decrease in noninterest expense, a $66,000 decrease in the provision for loan losses, and a $12,000 increase in noninterest
income partially offset by a $31,000 decrease in net interest income and $44,000 increase in federal income tax expense. Earnings per share, on a basic and diluted basis, for the nine months ended
September 30, 2003 was $0.59 and $0.58, respectively, as compared to $0.51 and $0.51 for the same nine month period in 2002.

Net Interest Income. Net interest income decreased by $31,000, or 1.3%, for the nine months ended September 30,
2003 as compared to the respective 2002 period. For the nine months ended September 30, 2003 total interest income decreased by $407,000, or 9.4%, and total interest expense decreased by $376,000, or
18.9%, as compared to the same nine month period in 2002. For the nine months ended September 30, 2003, the interest rate spread was 2.66% as compared to 2.68% for the nine months ended September 30,
2002. For the nine months ended September 30, 2003 the net interest margin was 3.13% as compared to 3.32% for the nine months ended September 30, 2002. For the nine months ended September 30, 2003,
the yield on interest earning assets was 5.31% as compared to 6.12% for the nine months ended September 30, 2002. The overall cost of funds was 2.65% for the nine months ended September 30, 2003, as
compared to 3.44% for the same period in 2002. A significant decrease in market interest rates was the primary reason for the decline in the yield on interest earning assets as well as the decline in
our overall cost of funds.

Provision for Loan Losses. The Company had no provision for loan losses for the nine months ended September 30, 2003, as compared to $66,000 for the
nine months ended September 30, 2002.

Noninterest Income. Noninterest income totaled $162,000 for the nine months ended September 30, 2003, as compared
to $150,000 during the same period in 2002. Most of this increase was attributable to a $21,000 increase in gain on sale of investment securities in the current period as compared to the prior
comparative period. Gain on sale of investment securities was $133,000 for the nine months ended September 30, 2003 as compared to $112,000 for the nine months ended September 30, 2002. This increase was partially offset by a $9,000 decline in service fees and other income on a comparative period
basis.

Noninterest Expense. Noninterest expense decreased $70,000, or 4.9%, for the nine months ended September 30, 2003,
as compared to the same period one year earlier. Equity in loss of limited partnership, legal and audit fees and compensation and benefits decreased by $25,000, $35,000 and $35,000, respectively.
Other operating expenses and franchise taxes increased by a collective $26,000 from period to period. The reason for the decline in compensation and benefits was attributable to the decline in staff
as previously explained.

Federal Income Taxes. The provision for federal income taxes increased by $44,000 for the nine months ended
September 30, 2003 as compared to the same period in 2002. The increase in the provision for federal income taxes was primarily due to an increase in pre-tax income of $117,000. The effective tax
rate was 30.0% for the nine month period ended September 30, 2003, as compared to 29.1% in the same period one year earlier. The above effective tax rates differ from the statutory rate of 34%
primarily due to our ownership interest in a low income housing tax credit program. The tax credits from this program are expected to last through 2006.

Liquidity and Capital Resources

Our main source of funds are deposits, and loan and securities repayments. While scheduled loan repayments and maturing investments are relatively predictable, deposit
flows and loan prepayments are more influenced by interest rates, general economic conditions and competition. Safe and sound banking practices require us to maintain cash and eligible investments at
levels that assure our ability to meet demands for deposit withdrawals and the repayment requirements of short-term borrowings, if any. We believe that sufficient funds are available for us to meet
our current liquidity needs. Total cash and cash equivalents amounted to $6.2 million at September 30, 2003.

We use our capital resources to meet ongoing commitments to fund various types of deposit withdrawals, to invest in securities, to fund existing and future loan
commitments, to maintain liquidity, and to meet operating expenses. At September 30, 2003, we had outstanding commitments to extend credit or purchase securities, totaling $4.0 million, including
$2.0 million of unused consumer lines of credit.

Home Federal is required to maintain minimum regulatory capital sufficient to meet tangible, core and risk-based capital ratios of 1.5%, 3.0% and 8.0%, respectively.
As of September 30, 2003, Home Federal significantly exceeded its regulatory capital requirements, with tangible, core, and risk-based capital ratios of 14.60%, 14.60% and 39.30%,
respectively.

Cautionary Forward-looking Statements

This document, including information incorporated by reference, contains, and future filings by First Niles Financial, Inc. on Form 10-KSB, Form 10-QSB, and Form 8-K
and future oral and written statements by First Niles and its management may contain, forward-looking statements about First Niles and its subsidiary which we believe are within the meaning of the
Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements with respect to anticipated future operating and financial performance,
growth opportunities, interest rates, cost savings and funding advantages expected or anticipated to be realized by management. Words such as may, could, should, would, believe, anticipate, estimate,
expect, intend, plan and similar expressions are intended to identify forward-looking statements. Forward-looking statements by First Niles and its management are based on beliefs, plans, objectives,
goals, expectations, anticipations, estimates and intentions of management and are not guarantees of future performance. First Niles disclaims any obligation to update or revise any forward-looking
statements based on the occurrence of future events, the receipt of new information, or otherwise. The important factors we discuss below, as well as other factors discussed under the caption"
Management's Discussion and Analysis of Financial Condition and Results of Operations" in this document and identified in our filings with the SEC and those presented elsewhere by our management from
time to time, could cause actual results to differ materially from those indicated by the forward-looking statements made in this document:

The following factors, many of which are subject to change based on various other factors beyond our control, could cause our financial performance to differ
materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements:

- the strength of the United States economy in general and the strength of the local economies in which we conduct operations;
- the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board;
- the financial markets interest rate and monetary fluctuations particularly the relative relationship of short-term interest rates to long-term interest
rates;
- the timely development of and acceptance of new products and services of Home Federal and the perceived overall value of these products and services by users,
including the features, pricing and quality compared to competitors' products and services;
- the willingness of users to substitute competitors' products and services for our products and services;
- the impact of changes in financial services' laws and regulations (including laws concerning taxes, accounting, banking, securities and insurance);
- the impact of technological changes;
- acquisitions;
- changes in consumer spending and saving habits; and
- our success at managing the risks involved in the foregoing.

Item 3. Controls and Procedures

An evaluation of the Company's disclosure controls and procedures (as defined in Section 13a-15(e) of the Securities Exchange Act of 1934 (the "Exchange Act") as of
September 30, 2003, was carried out under the supervision and with the participation of the Company's Chief Executive Officer, Principal Financial Officer and several other members of the Company's
senior management. The Company's Chief Executive Officer and Principal Financial Officer concluded that the Company's disclosure controls and procedures as currently in effect are effective in
ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is (i) accumulated and communicated to the Company's management
(including the Chief Executive Officer and Principal Financial Officer) in a timely manner and (ii) recorded processed, summarized and reported within the time periods specified in the SEC's rules
and forms. There have been no changes in our internal control over financial reporting (as defined in 13a-15(f) of the Act) that occurred during the quarter ended September 30, 2003, that has
materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

The Company intends to continually review and evaluate the design and effectiveness of its disclosure controls and procedures and to improve its controls and
procedures over time and to correct any deficiencies that it may discover in the future. The goal is to ensure that senior management has timely access to all material non-financial information
concerning the Company's business. While the Company believes the present design of its disclosure controls and procedures is effective to achieve its goal, future events affecting its business may
cause the Company to modify its disclosure controls and procedures.

PART II - OTHER INFORMATION

|Item 1. | Legal Proceedings:                                           
|------- | -------------------------------------------------------------
|        | There are no matters required to be reported under this item.
|Item 2. | Changes in Securities:                                       
|        | There are no matters required to be reported under this item.
|Item 3. | Defaults Upon Senior Securities:                             
|        | There are no matters required to be reported under this item.
|Item 4. | Submission of Matters to a Vote of Security Holders:         
|        | There are no matters required to be reported under this item.

|Item 5. | Other Information:                                           
|------- | -------------------------------------------------------------
|        | There are no matters required to be reported under this item.
|Item 6. | Exhibits and Reports on Form 8-K:                            
|        | (a)      The following exhibit is filed herewith:            
|        | See exhibit index                                            
|        | (b)      Reports on Form 8-K:                                

No reports on Form 8-K were filed by the Registrant during the quarter ended September 30, 2003.

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

|                        |     | FIRST NILES FINANCIAL, INC.Registrant                                                                            
|----------------------- | --- | -----------------------------------------------------------------------------------------------------------------
|Date: November 14, 2003 | By: | /s/ William L. StephensWilliam L. StephensPresident and Chief Executive Officer*(Duly Authorized Representative)*
|Date: November 14, 2003 | By: | /s/ Thomas G. MaleyThomas G. MaleyController*(Principal Accounting Officer)*                                     



|Number | Document                                                                                                                                                                                                                                                                    
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3      | The Certificate of Incorporation and Bylaws, filed on July 10, 1998 as Exhibits 3.1 and 3.2, respectively, to Registrant's Registration Statement on Form
SB-2 (File No.333-58883), are incorporated by reference.                                                          
|4      | Registrant's Specimen Stock Certificate, filed on July 10, 1998 as Exhibit 4 to Registrant's Registration Statement on Form SB-2 (File No.333-58883), are
incorporated by reference.                                                                                        
|10.1   | Employment Agreement between Registrant's operating bank subsidiary and William L. Stephens and Lawrence Safarek filed as exhibits to Registrant's Report
on Form 10-KSB for the fiscal year ended December 31, 1998 (File No.0-24849), is incorporated herein by reference.
|10.2   | Registrant's 1999 Stock Option and Incentive Plan, filed on November 12, 1999 as Appendix A to Registrant's Proxy Statement on Schedule 14A (FILE No.
0-24849), is incorporated herein by reference.                                                                        
|10.3   | Registrant's 1999 Recognition and Retention Plan filed on November 12, 1999 as Appendix B to Registrant's Proxy Statement on Schedule 14A (FILE No.
0-24849), is incorporated herein by reference.                                                                          
|11     | Statement re computation of earnings per share (see Note C of the Notes to Financial Statements included in this Form 10-QSB).                                                                                                                                              
|31.1   | Rule 13a-14(c) Certifications for the Registrant's Chief Executive Officer.                                                                                                                                                                                                 
|31.2   | Rule 13a-14(c) Certifications for the Registrant's Chief Financial Officer.                                                                                                                                                                                                 
|32     | Section 1350 Certifications